An in-house technical malfunction a while back at the Internal Revenue Service sent out erroneous penalty notices to many taxpayers. The misprogramming of the IRS computerized notice system caused the error. Many recipients were notified with overstated penalties or even with inappropriate deadlines. Taxpayers who receive one of such letters may be surprised by the figures or directions, but the IRS has tried to assure the general public that no additional penalties will be imposed as a result of this computer error.
Nature of the computer error
The problem began when the IRS rolled out an enhancement to its computer program used to generate penalty notices. A setting in one of the programs did not apply essential exemption rules, excluding calculations from being within the usual 10-day window for late filing. Late-filing and late-payment penalties therefore appeared larger than they were intended to be. In others, the notices spoke of penalty charging on already fully paid-in returns.
Who was affected
The notices were mailed to no fewer than 400 taxpayers nationwide, according to NBC Boston’s investigation. The IRS assigned the letters a set of individual notice numbers, CP2100A through CP2100C. Among those on the list of recipients are sole taxpayers and small businesses that filed Form 1040 or Form 1120 in tax year 2024. Residency state or income level did not qualify one for the notice of defect; the only thing that was common was having had an auto-computed penalty in the IRS computer.
How to check your mail
Taxpayers should sift through any recent IRS mail for notice codes CP2100A, CP2100B, or CP2100C. The notices typically arrive on a plain white envelope with the postmark “Important Tax Information Enclosed.” The date stamp on the notice will be between mid-August and early September 2025. If you received one, don’t pay the amount stated immediately. Instead, verify that the penalty notice accurately reflects your account status by checking your IRS online account or recent tax return history.
What to do if you received an inaccurate notice
1. View your IRS account online: Log in to your account at IRS.gov. Visit the “Notices and Letters” section to compare what you received with the IRS’s electronic record of the balance of your account.
2. Contact the IRS directly: Call the phone number on the notice. Employees have been notified of the error and will correct your account to the proper penalty amount or cancel it if it was posted in error.
3. Have documents available: Have your copy of your tax return, payment receipt, and error notice with you when you call. This expedites verification and correction.
4. Check for a revised notice: The IRS will issue revised notices to impacted taxpayers in late October. The revised notice will contain an explanation and the adjustment made to your penalty amount.
Why the error occurred
The IRS has been under increasing pressure to modernize its antiquated technology. This error indicates flaws in the agency’s system test procedures. Officials explained that the update in question was meant to automate notice generation, but not enough quality assurance kept it from slipping by them. The IRS’s technology modernization program is going to roll on for several years with additional spending and contractor support.
Potential consequences for taxpayers
While no additional financial harm can be done from the errant notices, they can cause undue stress and confusion. Taxpayers who are not familiar with IRS procedure may incorrectly think obligations are final and urgent. Small business managers of cash flow will make unnecessary payments or pay proper late fees if they act on errant information without corroboration.
IRS response and corrective action
The agency publicly acknowledged the mistake and promised full correction. A special hotline has been established for the affected individuals, and the IRS has suspended issuing new penalty notices temporarily until the core software issues are resolved. The IRS also plans to audit the notice-generating process and enhance system testing in order to prevent such occurrences in the future.
The IRS will post updates to this case on its news releases page at IRS.gov. Tax pros and advocacy groups also are advising clients and members. Getting IRS email alerts and following reputable tax news sources can help you receive timely notice of updated notices or other pertinent information.
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